When developing a larger residential site, it is common for the development to include dwellings to be allocated as affordable housing. The time of the acquisition by the Registered Provider can occur at a number of different times. This article focuses on sales at the “Golden Brick” stage.
What is “Golden Brick”?
It’s not a very expensive building material! Instead, Golden Brick refers to the point at which construction of the dwelling reaches above foundation level, so the first brick on the top of the foundations is the “Golden Brick”.
Why should I consider completing the sale of affordable housing units at Golden Brick stage?
The point of sale can be important in relation to the VAT treatment of the land where a property is opted to tax for VAT. Where the Golden Brick stage has been achieved, the residential building will qualify for zero-rating for VAT purposes, as under current HMRC rules the sale of a new dwelling is zero-rated. In order for this VAT treatment to apply, the tax legislation requires that the building is clearly under construction, therefore, so long as the construction has passed the foundations it will benefit from the zero-rating. This is why the Golden Brick is so important.
This benefits developers, as VAT incurred on the acquisition of the land (or other services) can be recovered. It also has potential benefits for the affordable housing provider buying the units because the buyer will pay the land value on Golden Brick, and separately pay for the remaining building works (usually in tranches at specified points in the build schedule). Therefore Stamp Duty Land Tax is only paid on the land value.
What happens after “Golden Brick”?
Where affordable housing units are being sold on Golden Brick, it is usual for the transactional documents to include a build agreement to require the developer to complete construction, so that the affordable housing provider is not left with a layer of bricks above the property’s foundation. The build agreement will either be included within the sale agreement, or it will be a separate document, and in either case, it will allow the developer access to the affordable housing units in order to finalise construction. Provisions will also need to be made for handover of the dwellings once they have achieved practical completion.
If you require further advice regarding affordable housing agreements or any other Real Estate matter, please contact us at realestate@herrington-carmichael.com, or call 01276 686222.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter
